On Monday, April 15--Tax Day--U.S. Congressman Lloyd Doggett (D), a senior member of the House Ways and Means Committee, will release a new non-partisan General Accountability Office (GAO) report showing the marked growth of corporate tax expenditures. He will also file a package of three pieces of legislation to reduce corporate tax loopholes.
"Of the many Americans who are right now getting their taxes ready to file, I doubt there are very many that think they will be able to pay a mere nickel on the dollar. But there are many of America's largest corporations that continue lobbying the Administration, and this Congress to let them pay a nickel on the dollar in taxes on a significant portion of their earnings," U.S. Rep. Doggett said today in a Ways and Means Committee hearing while questioning U.S. Treasury Secretary Jack Lew. A number of corporations have called for a "repatriation tax holiday," like that they enjoyed in 2004, to apply a mere 5.25% tax on any profits they claim to have earned abroad.
A portion of Rep. Doggett's questioning follows below:
"Over a three-year period, 30 Fortune 500 companies devoted more of their monies to lobbying this Congress than they did in paying taxes to the Treasury. Some have a negative tax rate. Many of our largest corporations are paying effective rates that are single digits.
"You are aware, and I believe the Treasury is involved in the comments recently of the top finance ministers in Germany, in France, and in the United Kingdom, calling for cooperation among the G20 countries to deal with this problem of corporate tax avoidance. We want to be competitive, we want every American company to be competitive, but not just to be competitive in terms of corporate tax avoidance, where we seem to be the world's leader at the moment.
"I have several pieces of legislation attempting to implement some of these budget provisions and to go a bit further than what I view as rather modest revisions. The concern I have, Mr. Secretary, is that while I think some adjustment in the statutory rate is appropriate to reduce it, that you devote every cent of that reform right back to the corporations. We know the history, this very year, is that in the fiscal cliff negotiations and the law that was finally approved, corporate America didn't contribute a dime. In fact, some corporations got major tax cuts out of the fiscal cliff negotiations. Isn't it reasonable to expect corporate America, having paid such low effective rates, to contribute a little to closing the budget gap and to the cost of our national security?"
The legislation Rep. Doggett will introduce on Monday is:
-The Stop Tax Haven Abuse Act aims to close several different loopholes by deterring the use of tax havens for tax evasion and strengthening the enforcement of our tax laws. The bill would also require SEC-registered corporations to report annually on the number of employees, sales, financing, tax obligations, and tax payments on a country-by-country basis, shedding more light on the extent of use of tax havens. This bill also provides for additional penalties for failing to disclose offshore holdings and for promoting abusive tax shelters.
-The International Tax Competitiveness Act addresses a large and growing area of tax abuse: the practice of developing a trademark, patent, or copyright in the U.S. and then transferring that intellectual property abroad to avoid taxes on the vast income it generates. This bill would treat income from the U.S. intellectual property as U.S. income and tax it accordingly.
-The Fairness in International Taxation Act would end the current practice of treaty shopping to avoid U.S. taxes. The United States has tax treaties with a number of trading partners that reduce the amount of taxes that a U.S. based entity owes on interest and royalties paid to a foreign parent. Since many of these foreign parent companies are set up in tax havens, these companies now bypass U.S. taxes by routing the payment through a tax-treaty country that then just transfers the funds to the tax-haven parent. This bill would end that legal fiction and say that you only get the tax-treaty discount if the parent company is actually located in a tax-treaty country.